What Is Business Scope (Explained: All You Need To Know)

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What does scope mean in business?

What’s essential to know?

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Business Scope Meaning

You’re looking to write a business plan, apply for a business loan, or register a new business entity and you’re asked to provide the “scope” of your business…

What does business scope mean?

What should you indicate there?

Defining and properly understanding your business scope is very important for all businesses to ensure that all employees, managers, executives, and directors are all paddling in the same direction.

In the English language, the word scope is defined as “area” or “subject matter”.

In essence, “business scope” means the “area” in which your business operations (your business objective).

Depending on your business, you may have to define your business scope per department, per region, per product line, or for the entire business.

For example, a small boutique selling t-shirts will have a highly defined scope (the sale of consumer goods at retail).

On the other hand, a large conglomerate having subsidiaries operating in different lines of business will have to define its scope per subsidiary or line of business.

Business Scope Definition

How do you define business scope?

If you ask ten people to define business scope, you may potentially get ten different answers.

Business scope is a broad term that can be defined in many ways.

Scope in business tends to summarize in a few words what your company does.

Here is a definition of business scope that can be considered:

Business scope refers to the main strategic direction of your company

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In other words, your business scope refers to the reason why company shareholders appoint the board of directors and the board’s overall objectives.

Your “business scope” should refer to every business activity performed by your company from sales, marketing, product development, contracting, and all other functions.

Why Is Business Scope Important

Defining the scope of your business is quite important.

For a new company starting out, defining your business scope allows you to better target your business plan, increase your chance of getting the business financing or loan that you need, and ensure that everyone in your company is working on the same objective.

Having a good understanding of your business scope will also allow you to properly define your business when you’re looking to form a new business entity.

In many states, you’ll be asked to provide the “business scope” when you’re looking to form a new business entity.

Having defined your business scope, especially for a new business, will help you immediately answer this question.

In other jurisdictions, the scope of your business is also mentioned in the company’s incorporation papers, charter, memorandum, articles of association, or similar documents.

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How To Write A Business Scope

The scope of your business should be clear enough allowing everyone to quickly understand what your business does.

To define your business scope, you’ll first need to understand the nature of your business.

There are three broad nature of business categories: service business, merchandising business, and manufacturing business.

For example, a consulting firm will be in the service business whereas a grocery store will be in the merchandising business.

Once you have defined your overall business nature, then you can start defining your scope.

For most small businesses, the business scope should cover what your company does as a whole.

However, large businesses may need to consider their scope per unit, region, industry, or other segments.

To narrow your scope, consider the strategic direction of your company.

What is your company looking to achieve?

What’s the overall purpose of your company?

Who are you trying to serve?

Your scope should cover the products and services you offer, all your physical locations, and the markets you serve.

For example, a shoe store will potentially have the following business scope: provide affordable sports shoes to sports amateurs and athletes.

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Business Scope Example

Let’s look at a few examples of business scope to better understand the topic.

Example 1

A family-owned catering business can define its scope as “providing catering services to individuals and companies in the city”.

Example 2

A small boutique could define its scope to be “purchase consumer goods wholesale and sell to consumers at retail”.

Example 3

A large company having different lines of business can define a scope for each line of business, such as:

Provide professional services to companies for the implementation of network security products and equipment
Provide network security products and equipment to companies of all size

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Takeaways

So there you have it folks!

What does business scope mean in simple terms?

Scope in business refers to a statement summing up all the activities performed by a company from sales, marketing, product, contracts, and more.

For most businesses (small businesses and SMEs), business scope covers all departments and all functions of the business.

For larger organizations, the scope may be defined per region, industry, or other qualifications.

Properly defining your business “scope” is crucial allowing you to quickly verbalize what your company does and the results it is looking to achieve.

Now that you know what “business scope” means, why it’s important, and how to define one, good luck with your business!